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Thursday, April 10, 2014

Guidelines on Interest subsidy for education loans granted prior to 1st April 2009 and outstanding as on 31st Dec 2013

Canara Bank, Nodal bank for interest subsidy has now released the guidelines officially to claim the interest subsidy on the education loans granted prior to 1st April 2009 and outstanding as on 31st Dec 2013.

The guidelines can be downloaded from the link.
or

Updated on 15th April 2014:  Election Commission has now announced that no bank should make publicity of interest subsidy scheme due to the General Elections and not to disburse the interest subsidy till the completion of elections.  However the eligible students are advised by ELTF to get in touch with the concerned Bank Manager for further instructions.



Wednesday, April 9, 2014

Minutes of the meeting of the Working Group on Educational Loan Scheme held on 31st January, 2014 at Canara Bank, Bengaluru


Minutes of the meeting of the Working Group on Education Loan Scheme held on 31st January 2014 at Canara Bank, Bangaloru. In this minutes the working group has discussed the problems relating to the disbursement of interest subsidy. 

                        Indian Banks’ Association

Minutes of  the meeting  of the Working Group  on Educational Loan Scheme
held on 31st January, 2014 at Canara Bank, Bengaluru

The Nodal Bank under the Scheme viz. Canara Bank had convened a meeting of the Working Group on Educational Loan Scheme on Friday, 31st January, 2014 at 10.00 a.m. at Canara Bank, Head Office, Bengaluru to discuss the issues related to submission of claims by Member Banks under the scheme.  The meeting was chaired by Mr. S S Bhat, General Manager, Canara Bank and Mr. Sahdev Singh, Under Secretary, MoHRD, Govt. of India   along with  the special invitee,  the following were present:

1.      Mr. Sahdev Singh, Under Secretary, Ministry of HRD, Government of India
2.      Mr. S.S. Bhat, General Manager, PC & FI Wing, Canara Bank
3.      Ms. Prabhuta Vyas, Sr. Vice President, Indian Banks’ Association
4.      Mr. C S Vasantha Kumar, General Manager, Indian Overseas Bank
5.      Mr. M Balakrishnan, General Manager, Indian Bank
6.      Mr. K S Prabhakara Rao, Advisor, Financial Inclusion, Canara Bank
7.      Mr. S Ramesh, General Manager, RRB & LB wing, Canara Bank
8.      Mr. K R Basava, Dy. General Manager, State Bank of India
9.      Mr. Rakesh Luthra, Dy. General Manager, Punjab National Bank
10.  Mr. G Anantharam, Dy. General Manager, Syndicate Bank
11.  Mr. Narender Singh, Dy. General Manager, Central Bank of India
12.  Mr. M V Narasimha Rao, Dy. Zonal Manager, UCO Bank
13.  Mr. I C Amruth Kumar, Dy. General Manager, Union Bank of India
14.  Mr. A K Das, Dy. General Manager, PC&FI Wing, Canara Bank
15.  Dr. M Jayadev, Associate Professor, IIM, Bangalore
16.  Dr. D Geetha Rani, Associate Professor, NUEPA, Delhi
17.  Mr. K R Badrinath, Asst. General Manager, Canara Bank
18.  Mr. Purushotham, Manager, Canara Bank
19.  Mr. Sankar San, Manager, Canara Bank  
20.  Ms. Juihathi, IIM, Bangalore

Mr. S.S. Bhat, General Manager welcomed all the participants to the Working Group meeting on Central Sector Interest Subsidy Scheme on Education Loans. He highlighted the following points in his opening remark:-
·         There is lack of awareness among some Branch Managers about CSIS Scheme which has led to lot of complaints from the student community. 
·         Interest subsidy amount is credited to the accounts of SC Candidates in full and only a partial amount is credited to the accounts of ST and other General Candidates.  This partial credit of interest subsidy has led to complaints to Ministry of HRD, Indian Banks’ Association, the concerned Bank, Nodal Bank and  Education Loan Task Force.  Ministry of HRD to expedite settlement of claims.
·         FAQs can be developed based on the analysis of the complaints and other issues that are raised by the students, and the same can be placed in the CSIS Web Portal as well as in the web site of the individual Banks.
·         Lot of queries is coming under RTI.  The applicants send a copy of the same to the Ministry and the Nodal Bank and IBA.  Queries to be sent directly to the concerned Bank from the Ministry instead of sending it to Nodal Bank so that the concerned Bank can send replies to the queries at the earliest possible time to the applicants.
·         Issue of refund interest subsidy claims of various Member Banks:    Ministry is very serious about this aspect.   He requested all the Member Banks not to give scope for refunds in future and ensure proper checks at the branch level.  Refund of claims is to be reduced to the minimum extent.
·         With regard to share of SC/ST and Minority Communities under CSIS Scheme on Education Loans,  utilization under these categories is less and not upto the budgeted extent. Banks should pro-actively propagate the Scheme among SC/ST and Minority Communities.  There is an apprehension in the minds of Ministry of HRD, Government of India that the EL applications of SC/ST and Minority Communities are not considered sympathetically at branch level.
·         With regard to the concern expressed by the Government on regional disparities,.  he informed that 85% of the claims on Education Loan Interest Subsidy are from Banks located in the Southern Regions.  In respect of Northern, Eastern and Western Regions, the amount of interest subsidy is very less.  On an analysis, it is observed that the maximum claims of interest subsidy are in the States of Tamil Nadu and Kerala followed by Karnataka and Andhra Pradesh.  Locality/ popularity of the Educational Institutions is one of the reasons for the same.  Of late,  there has been some improvement in the growth of Education Loans in the Northern and Eastern Regions also.  Regional disparity has to be reduced to a great extent.

Mr. Sahdev Singh, Under Secretary, Ministry of HRD, in his opening remarks, stated that for funds to be released by Government of India, the approval of the Parliament is required.  With reference to the request of Nodal Bank for release of funds to the extent of ₹ 2,500 crores  for the claim pertaining to last financial year and current financial year, Mr. Sahdev Singh informed that Ministry of HRD will take up this matter with appropriate authority for sanction of the estimated budget submitted by Nodal Bank.  Ms. Prabhuta Vyas, Senior Vice President, IBA suggested to take up the issue with Ministry of Finance as Banks are facing lot of problems due to release of funds in tranches. 
Mr. S.S. Bhat, General Manager stated that the estimate given by Nodal Bank under CSIS is in tune with the claims.  He suggested that while finalizing the budget for 2013-14 and 2014-15, the matter may be discussed with the Nodal Bank and IBA for finalization of adequate funds.  Member Banks would also inform the required estimated claim amount under the Scheme to the Nodal Bank to get a fair idea about the estimated amount.   He stated that the figure relating to amount of claim provided by Nodal Bank is near to the actual claims submitted by Member Banks.
Official from State Bank of India informed that the request for Education Loans are on the rise in the State of Bihar and Jharkhand in the recent past and hence, the demand for interest subsidy will be more in the coming days.  He requested Ministry of HRD to see that the funds are provided / arranged in full according to the estimate provided by the Nodal Bank.  Mr. Sahdev Singh assured that MoHRD will try to convince the Ministry of Finance in this regard.
Ms. Prabhuta Vyas, Senior Vice President, IBA was of the view that release of interest subsidy in different percentages to different categories of students by Ministry of HRD is not proper and requested them to release the funds in such a way that interest subsidy claims are settled in full for all categories of students.   By doing so, complaints can be reduced to a great extent from the students under CSIS.
With this, the following Agenda Items were taken up for discussion.
Agenda Item 1: Opening of the web portal for submission
for the period from 2009 to 2013

Mr. S. Ramesh, General Manager stated that many Member Banks have requested for submission of pending claims pertaining to earlier  FYs 2009-10, 2010-11, 2011-12 and 2012-13 as many eligible students have complied with the condition of submission of Income Certificate obtained from the designated Income Certificate Issuing Authority.    Nodal Bank has already made a representation to Ministry of HRD during April 2012, August 2013 and December 2013 to examine the above issue as the problem is faced by all Member Banks.

However, Mr.  Sahdev Singh has intimated that earlier in a meeting held on 02.04.2012, it was decided that 
“All pending claims pertaining to the period 1st April, 2009 to 31st March, 2010 and 1st April, 2010 to March 2011 may be submitted by banks to the Nodal Bank during the period 1st April, 2012 to 30th June, 2012.
All pending claims pertaining to the period 1st April, 2011 to 31st March, 2012 may be submitted by the banks to the Nodal Bank during the period 1st April, 2012 to 30th June, 2012.  Supplementary claims, if any, may be submitted by the banks during the period 1st October, 2012 to 30th November, 2012.”
Again in a meeting held on 10th October, 2012 it was decided that:
“All pending claims pertaining to the period 1st April, 2009 to 31st March, 2010 and 1st April, 2010 to 31st March, 2011 may be submitted by banks to the Nodal Bank during the period 1st November, 2012 to 30th November, 2012.
All pending claims pertaining to the period 1st April, 2011 to 31st March, 2012 may be submitted by the banks to the Nodal Bank during the period 1st December, 2012 to 31st December, 2012.”
Accordingly, due to budget constraints, again it is not possible to allow to submit the pending claims for FY 2009-10, 2010-11, 2011-12 and 2012-13 during FY 2013-14.
An official from Syndicate Bank suggested to open the Window exclusively for the above purpose during November-December of this year.

Ms. Prabhuta Vyas of IBA suggested that as the CSIS was launched effective 1st April, 2009 and as the RRBs and Co-operative Banks were since made aware of the scheme in 2012 only, hence it is logical for MoHRD to consider claims received from RRBs and Co-operative Banks with effect from 1st April, 2009.  Also there are chances of left out claims by the student borrowers because of non-submission of income proof certificate / non issuance of proof by the State officials to students.  The MoHRD is requested  to permit as a One Time measure for banks to submit all their pending claims from all  Scheduled Commercial Banks  with a pre-derived cut-off date to be decided by the Ministry of HRD.

This would definitely go a long way in generating good will among the students  community and will encourage the cause of education of students belonging to economically weaker section and will serve the Nation’s cause.
(Action: MoHRD)
Mr. A.K. Das, Deputy General Manager, Canara Bank suggested to give advertisement and wide publicity providing an opportunity to the students to prefer their claims pertaining to the earlier years and giving a date as the deadline beyond which no claim will be entertained.

Ms. Prabhuta Vyas, Senior Vice President, IBA suggested to Ministry of HRD, Government of India to give advertisement  through DAVP mentioning the salient features of the Scheme on behalf of all the Member Banks as the cost of advertisement incurred by each individual Member Bank would be enormous if they take up the above task on their own.
(Action: MoHRD)
Agenda Item  II: Release of funds in tranches by Ministry of HRD:

Ms. Prabhuta Vyas stated that students/parents are coming with queries/complaints that while the Scheme itself is not discriminating the eligibility criteria, why at the time of release of interest subsidy, there is discrimination.   Moreover,  Bank branches are facing operational difficulties in this regard and hence this issue needs to be resolved. She opined that Bank’s problems would be solved to a great extent if the funds are released in equal proportions to all categories of students.
(Action: MoHRD)

Official from State Bank of India also agreed with views of Ms. Prabhuta Vyas and informed that their branches are also facing similar problems with regard to the above aspect.

Agenda Item III:  Guidelines for refund of claims under CSIS Scheme:

Mr. S. Ramesh, General Manager opined that refund of claims under CSIS Scheme is one issue which is prevalent in almost all Banks.    He suggested Member Banks to put in place a proper mechanism to submit the claims properly.  He felt that this sort of problems are creeping in due to manual intervention.  He stated that Nodal Bank is receiving lot of objections from Ministry of HRD in this regard.

Mr. S. Ramesh requested Member Banks to advise the branch officials to ensure that this type of instances is avoided to a maximum extent.
(Action:All CSIS participating Banks)
Official from Syndicate Bank informed that letters are being issued to the Branch Managers that they would be accountable for such type of instances and any penalty imposed by the Ministry of HRD would be recovered from them only. 
Ms. Prabhuta Vyas, Senior Vice President, IBA requested the Member Banks to make sure that Branch Managers are aware of the Scheme.   Many students are not aware that they have to submit Income Certificates for availing interest subsidy under the Scheme.   Many students are of the view that EL under CSIS Scheme is an interest free loan.  Students should be made aware that they have to pay interest first and then claim the interest subsidy from the branch by submitting Income Certificate.

Mr. K.S. Prabhakara Rao, Advisor, Canara Bank requested Member Banks to obtain Income Certificates from the students at the time of sanction of Education Loans itself instead of calling for Income Certificates at the time of submission of interest subsidy claims as it will save lot of time to the Bankers.
Ms. Prabhuta Vyas suggested to put FAQs – Dos and Don’ts for the student borrowers and for the Bank branches in the website of the Banks which will be helpful for the Branch Managers as well as the student community.
Mr. Sahdev Singh opined that as per the analysis made by the Nodal Bank (Canara Bank), the major reasons for refunds are on account of-
·         non-submission of Income Certificates by the student borrowers,
·         Account not eligible for subsidy,
·          Excess claimed, Wrongly included/erroneous claimed,
·         study abroad,
·         Non-compliance of scheme guidelines,
·         Disbursement prior to eligible period,
·          Income less than ₹ 4.5 lacs p.a.,
·         Subsidy claimed after moratorium period, Excess interest charged and claimed,
·          Course completed,
·         Second loan,
·         Repayment already commenced,
·          Subsidy claimed for 2008-09 which is not eligible,
·          Loan under Management Quota, ineligible courses,
·          double claim submitted and calculation error, etc.

He requested that all bankers should ensure that refunds are  not made on account of the above mentioned reasons.

Mr. S. Ramesh, General Manager suggested all the Member Banks to send the details of refund, if any, as per the format which will be made available in the web portal, shortly by Nodal Bank.
(Action: Canara Bank)
Agenda Item IV: Display of list of eligible courses that are covered under CSIS Scheme:
Mr. S. Ramesh, General Manager stated that IBA has given the list of eligible courses and the list given by them is not the final one as the same is dynamic.  Banks are including some other Courses under CSIS Scheme.  It is only an indicative list.   He requested that Ministry of HRD may come out with a list of eligible courses under CSIS Scheme.

Ms. Prabhuta Vyas opined that there will not any problem if Ministry of HRD continuously updates the list of eligible courses as new courses are being introduced every year and innovation has become the order of the day.

In this regard,  Mr.  Sahdev Singh has intimated that Ministry is regularly writing to UGC, AICTE, MCI, DCI, PCI and the respective Central Government Ministries such as, Agriculture, H&FW, Tourism, Civil Aviation, Social Justice, Labour, Law, Commerce, Coal, Petroleum, Chemical, S&T and Shipping, etc. for displaying the names of accredited Universities/Institutions and recognized professional courses on website.

Agenda Item V: Guidelines for inclusion of Co-operative banks under the purview of CSIS Scheme (Banks which are not featuring in the Schedule II list of RBI):
Mr. S. Ramesh, General Manager informed that there is a huge demand from the Co-operative Banks which are financing Education Loans that they should also be included for claiming the interest subsidy under CSIS Scheme.  He enquired with the Ministry of HRD and IBA as to whether the scope can be enlarged for covering the interest subsidy.

Ms. Prabhuta Vyas, Senior Vice President, IBA reiterated its earlier Managing Committee decision and informed  that IBA will be in a position to advise only its members for uploading all information relating to CSI Scheme.  As regards, Co-operative Banks which are not member of the IBA, the MoHRD  may workout a separate dispensation for submission / payment of claims under the scheme as well as uploading of information relating to students entitlement benefits in the web portal.   She further informed that Co-operative Banks which are in the Schedule II List of RBI and are implementing IBA’s Model Education Loan Scheme only are covered and eligible for claiming interest subsidy under CSIS Scheme. She further clarified that in the year, 2011-12, the Ministry of HRD had advised that the Interest Subsidy Scheme would be applicable also to all Co-operative Banks which are listed in the Schedule II of Reserve Bank of India Act, 1934 and as amended from time to time and for the purpose of extending the Interest Subsidy Scheme to Co-operative Banks. Official from Syndicate Bank made a request to Ministry of HRD to seek the views of NABARD in this regard. 

However, Mr. Sahdev Singh also requested to all for making / give suggestions that - which entities/Cooperative Societies/Banks (i.e. Scheduled/Non-scheduled / State Co-operative / Distt. Co-operatives, etc.) can be covered under the scope of CSIS. Accordingly, MoHRD will write to NABARD for further future course of action, in this respect. 

Agenda Item VI: Income Criteria for Economically Weaker Sections (EWS):

With regard to enhancing the income limit from ₹.4.5 lakhs to ₹.6.00 lakhs, Mr. Sahdev Singh stated that there is already a huge burden on the part of the Ministry and the same can be thought of , after some years.

Agenda Item VII: Monitoring of beneficiaries (SC/ST/Minority/Disabled etc.) of the Scheme:

With regard to Monitoring of beneficiaries (especially, women, SCs/STs/Minority (Muslims in particular)/Disabled, etc.)  of the Scheme, Ms. Vyas opined that keeping in mind the national objective, banks should strive to increase the no. of beneficiaries and that the  Bank branches can be sensitized in this regard.   Nodal Managers  can be designated by the Member Banks for the purpose of monitoring and ensuring  maximum coverage of the students belonging to the above category besides crediting the interest subsidy amount to these students’ accounts in time.

Agenda Item VIII: RTI Applications/FAQs/Complaints/Grievance Redressal Mechanism/Problem of Customer Management (Agenda included as per the directions from Ministry of HRD):

Mr. S. Ramesh, General Manager, Nodal Bank stated that lot of RTI queries are being received not only by branches of our Bank but also branches of other Banks.    He stated that Ministry of HRD, Government of India is forwarding RTI applications pertaining to other Banks also to the Nodal Bank which is not having the required information for disposal of such applications.   He also requested the Member Banks to share the good practices adopted by their Banks for administering the Scheme and the initiatives taken by them with regard to recovery of EL/follow up under the Scheme.

Ms. Vyas suggested that the complaints / queries may be resolved through robust grievance redressal mechanism within the organisation.  The arrangements need to be widely publicised with details of contact persons / escalation matrix etc. All banks are required to sensitise their branches to have these facilities made available / make awareness among students approaching the banks for sanction of the education loan. 

All banks may provide a toll free line for receipt of complaints and the Number may be prominently displayed in the branch premises.  Also, she highlighted that IBA has been constantly receiving an average of 10-15 complaints on non-availability of Interest Subsidy from student community in this regard.  Also, MoF, MoHRD, MPs and MLAs also forward various representations received by them and requesting us to take action in the matter.  Apart from this, we are receiving a large number of telephone calls / emails on education loan queries / guidance and complaints. 

However, to simplify the procedure, she requested Ministry of HRD to send the RTI applications / Complaints  pertaining to other Banks directly for redressal of the same at the earliest to the concerned banks and not to IBA or Nodal Bank.
(Action: MoHRD)
Later, the special invitees from NUEPA,  New Delhi and IIM, Bangalore were requested to inform the outcome of their study of the CSIS Scheme.
Ms. Geetha Rani, Associate Professor, NUEPA, speaking on the occasion, stated that the sanctity of submission of Income Certificate by the students for availing interest subsidy under CSIS Scheme needs to be looked into.  Further, she stated that though the number of students availing interest subsidy in Tamil Nadu is high, but the per student interest subsidy is less.
She requested the Member Banks to provide them the details of Education Loan availed by the students under different categories and the interest subsidy sanctioned by them so that NUEPA can make an effective study on the same and come out with suggestions.

Mr. Jayadev, Asst. Professor, IIM, Bangalore, speaking on the occasion, stated that they have already collected data from Canara Bank about CSIS Scheme and are  analysing the various aspects of the Scheme.  He stated that Government is trying to increase the Gross Enrolment Ratio in the Educational Institutions, due to which Educational Loans have been increasing.
He opined that Branch Managers in the Banks must be aware of the eligible courses as well as the recognized Educational Institutions so that it becomes easy for them at the time of claiming interest subsidy.   He stated that there should be more clarity with regard to eligible courses and recognized Educational Institutions from Ministry of HRD.

When it comes to identification of the potential candidates, Educational Institutions can also play a vital role.  Local Banks can have a meeting with the Educational Institutions at the beginning of the calendar year and an Office can be opened in the Educational Institutions with the assistance of one or two persons.    He also made a suggestion not to sanction Educational Loans to those SC/ST students who have already been sanctioned Scholarship.  Official from IIM, Bangalore further opined that good co-ordination between Banks and Educational Institutions will go a long way in recovery of the Educational Loan from the students.

The meeting ended with the vote of thanks to the chair.


*********


l.eduiss.Finalminutes 31012014

Tuesday, March 18, 2014

Interest subsidy scheme for education loans availed prior to 31st March 2009

While presenting the interim budget for 2014-15 in Lok Sabha, Finance Minister of India announced interest subsidy for the education loans granted prior to 31st March 2009.  Already there is a system of interest subsidy for the loans granted on or after 1.4.2009.  This new scheme announced by Finance Minister extends the scheme to the loans granted earlier, but outstanding as on 31st Dec 2013.  

Though IBA and Ministry of HRD have not made the guidelines public, ELTF is able to procure a circular issued by Dena Bank, through one of its members.  Please go through the guidelines embedded below.  This guideline applies to all the Banks.

Students and parents may approach the concerned bank managers and take further guidance.  If the Bank Managers are not cooperating, the students may complain to the Chairman of the concerned bank and also to the Governor of Reserve Bank of India in writing.



Friday, November 8, 2013

IBA extends time to submit interest subsidy claim till the end of Dec 2013

Indian Banks Association has issued notification extending the time for banks to submit interest subsidy claim of 2012-13 till the end of 31st December 2013.  The eligible students who have not submitted the income certificate may contact the concerned Branch Managers and complete the formalities.



Saturday, November 2, 2013

IBA clarifications on Education Loan and Iinterest subsidy

Finiance Miniter and IBA response on Education Loan and interest subsidy
Finance Minister and IBA response on
Education Loan and interest subsidy
Mr Hansraj G Ahir, Member of Parliament from Maharashtra, at the request of ELTF, took up the problems faced by the students while availing education loan with the Prime Minister and Finance Minister on 4th Sep 2013.  Now MOS (Finance) has responded to Mr Hansraj attaching the comments from Indian Banks Association.  

As per IBA, the banks should not refuse loans citing service area.  Also, the eligible students need not pay any interest to the bank during the study period and moratorium period. The banks are required to communicate the decision within 15 to 30 days.  If the students get admission through common merit based admission process (like Anna University Counselling), banks should not insist on minimum marks.  

Please go through the communication from IBA for more details, by clicking on the image posted above.
  

Monday, October 21, 2013

Prime Minister orders investigation of mis management of interest subsidy scheme

Acknowledgement from Prime Minister for the representation
Acknowledgement from Prime Minister for the representation
Recently, ELTF briefed Mr Hansraj G Ahir, MP from Maharashtra about the problems faced by the students and parents on getting education loan and interest subsidy from the banks.   Mr Hansraj G Ahir is a well known BJP MP and he is the whistle blower of coal scam in the Parliament.  Mr Hansraj immediately forwarded our representation to Dr Manmohan Singh, Prime Minister personally on 4th Septeber 2013.  Prime Minister has personally acknowledged the representation on 19th September 2013.

In the representation, we have brought out various issues faced by the students and parents, while approaching the banks for education loan.  We have also mentioned that the banks are not implementing the interest subsidy scheme properly.  We have indicated to the Prime Minister that many of the eligible students are not denied interest subsidy either fully or partially.



As per the Government of India Scheme, 100% interest subsidy is provided to the eligible students.  That means the eligible students need not pay even a single rupee by way of interest to the bank till the end of moratorium period.  (Please visit FAQ section of this site for more details). 

ELTF has also demanded CAG/RBI audit of all the education loans to ensure that all eligible students have been granted with interest subsidy fully.  

Now Prime Minister has forwarded the representation to Ministry of HRD, who administer the interest subsidy for their comments.  Now Ministry of HRD is investigating into the matter.

We have found that the Banks are misleading the students like this.
(a)  Managers telling the students that the scheme itself is not implemented;
(b)  Bank Managers not claiming interest subsidy for the eligible loan accounts;
(c)  Banks claiming part amount of interest subsidy from the Government (instead of 100%) and claiming the balance interest from the students;
(d)   Banks claiming full interest subsidy from the Government and also recovering interest from the students.

All the above actions are in violation of the Government guidelines.  Now Ministry of HRD is investigating into the matter.

If the students feel that they are eligible for interest subsidy and are misled by the bank managers, they can straight away report to the Chairman of the concerned bank and also to RBI for necessary action.  

Please also read the IANS Story published in various media on this issue.

http://www.business-standard.com/article/news-ians/cag-rbi-should-audit-educational-loans-interest-subsidy-113101800769_1.html

IANS  |  Chennai  October 18, 2013 Last Updated at 18:32 IST

'CAG/RBI should audit educational loans interest subsidy'

The Comptroller and Auditor General (CAG) or the Reserve Bank of India (RBI) should audit the manner in which the banks operate the interest subsidy scheme for their education loans, says K.Srinivasan, convenor of Education Loan Task Force (ELTF).

"Based on the complaints received by ELTF, many students have not been getting interest subsidy from many banks. There are bank managers who even fob off the borrowers denying any such interest subsidy scheme," Srinivasan, a former banker, told IANS.

ELTF guides students on rules and regulations governing the education loans offered by nationalised banks.

He said Canara Bank is the nodal agency for setting the bank's claims under the interest subsidy scheme for a fee and it would claim the amount from the human resource development ministry.

Srinivasan said under the interest subsidy scheme, the centre would reimburse the banks the interest due on the loan amount till the end of one year from the date of completion of the course, or six months from the date on which the student lands a job after his course -- whichever is earlier.

The centre would reimburse the interest to those students whose parental income is less than Rs.450,000 per annum, and on loans which are available only for professional and technical courses and not for arts/science, and students of diploma course, Srinivasan said.

Citing union budget documents, he said during 2011-12, Rs.697 crore was allotted for the loan's interest subsidy. Between 2012-13 and 2013-14, Rs.800 crore and Rs.1,100 crore have been allocated.

"I understand the Rs.1,100 crore allocation for this fiscal has already been exhausted," he added.

According to him, the total education loan portfolio for the banking sector as on March 31, 2013, is around Rs.53,000 crore in around 25 lakh accounts.

Under the Indian Bank's Association (IBA) guideline loan repayment could be done over a 10-15 year period.

"But banks force the students to pay within three/five years. With the poor economic situation and the lack of employment opportunities, the students are not able to pay huge monthly dues. The banks then classify the accounts as non-performing and give a negative public image about this portfolio," he said.

Banks also shame the students by pasting their pictures on the branch notice boards when they default on dues.

"We appreciate the interest subsidy scheme, but the way in which the interest subsidy is managed needs to be thoroughly audited by CAG or RBI," said the ELTF convener.

  

Saturday, July 27, 2013

Education Loan - Frequently asked questions

Education Loan - Frequently asked questions

Education Loan Task Force (ELTF) has been receiving lot of mails daily  seeking clarifications.  Based on the type of questions, we provide the correct information for the benefit of students and parents.



01.  In some areas, banks allocate themselves few wards for grant of education loans.  Is it right?

There is no service area approach for granting education loans.  The students can approach any bank in their area.  Either they can submit applications directly or online through their websites.  Banks cannot refuse to accept the applications on the grounds of ward allotment. If some of the banks insist on 'service area' concept, the students can complain to the concerned Regional Manager and the Chairman of the Bank.

02.  After submission of applications, is there any time limit for the banks to process and communicate decision?

The students are entitled to receive acknowledgement from the banks after submission of applications.  The acknowledgement should contain date and time of receipt of the application and the signature of any authorised official of the bank.  The banks should process the application and communicate the sanction or refusal within 15 to 30 days.  The refusal has to be approved by higher authority of the bank.  The students are entitled to get a letter stating the reasons for refusal.

03. Some banks mention as IBA Scheme and Non-IBA Scheme.  What is the difference?

In consultation with the Government of India, Indian Banks Association (IBA) has forumulated a scheme for granting education loan to students.  All the Public Sector Banks have accepted this Scheme suggested by IBA.  The latest IBA scheme is available in this link.

http://www.eltf.in/2012/10/education-loan-iba-scheme-effective.html

If the students are not eligible under IBA scheme, depending on individual cases, banks come forwrd to help the students with education loan under their own terms and conditions.  Even most of the private banks have not been following the IBA scheme.  They also grant under their own terms.  These loans are known as Non IBA scheme.  The security concessions, interest subsidy, long repayment schedules may not be available under Non IBA Scheme.

04.  Can the students joining the colleges through Management quota, avail the education loan from banks?

Prior to Sep 2012, the banks were not granting education loans to the students joining under Management quota.  From Sep 2012,  IBA included a note in the scheme as follows:

quote


It would be in order for banks to consider a meritorious student (who qualifies for a seat under merit quota) eligible for loan under this scheme even if the student chooses to pursue a course under Management Quota.
Unquote


IBA has given permission to the individual banks to formulate their own scheme.  Generally, banks do not prefer to grant education loans under IBA scheme to the students who join under the Management quot directly, without going through counselling route or merit route.  

When the student applies under merit channel and gets an allotment of seat or college, he can refuse the allotment on the grounds of (a) not getting the course which he wanted or (b) not getting the college which he opted.  If he refuses the allotment and then joins the course of his choice under Management quota, he is eligible for loan under IBA scheme.  

Instead if the student directly joins the management quota, then banks will not consider granting education loan under IBA scheme.


05.  Who is eligible for interest subsidy?

The students availing education loans from banks are eligible for interest subsidy on the following conditions:

(a)  The loan should have been sanctioned under IBA scheme;
(b)  The student should be pursuing professional / technical courses (after Plus two) in India;
(c)  The gross income of the parents / family should be less than Rs.4.50 lakhs.  The students should submit income certificate signed by the competent authority appointed by the State Government.  
(d) The loan amount or part of the loan amount sanctioned on or after 1.4.2009 is eligible for interest subsidy.  

(For more details read the guidelines at http://www.eltf.in/2012/03/interest-subsidy-scheme-on-education.html )

If the students are eligible for interest subsidy and if they submit the income certificate to the bank, then the students can get 100% interest subsidy till the moratorium period (One year after completion of study or six months after getting employment, whichever is earlier).  The banks should not collect interest from the students till the end of moratorium period.  The banks  will claim from the Government.  If any bank insists on the students to pay interest periodically as pre-condition to release the next instalment of fees, it is a violation of Government guidelines.  The students can refuse to make interest payment and can complain to the Chairman of the Bank and to RBI.  

Even if the students are not eligible for interest subsidy, the students can opt to pay accrued interest later.  In such cases, the banks will calculate interest and add the accrued interest along with principal and fix up EMI.  The students can submit a letter to the Bank Manager to this effect.  Bank cannot refuse to accept the request.

If a loan amount of Rs.2,00,000 was sanctioned in 2008 to be disbursed @Rs.50,000/- each year and Rs.1,50,000/- was disbursed in 3 years after 1.4.2009, then this amount of Rs.1.50 lakh is also eligible for interest subsidy.  The students can give a letter to the banks seeking interest subsidy.  

Interest subsidy is available only for one course either UG or PG. More than one person from the same family can avail interest subsidy.

These rules apply only to loans sanctioned under IBA scheme.  

06.  Can more than one person avail the education loan from the bank under IBA scheme?  Will they be eligible for interest subsidy?

More than one person can avail the education loan from the same family (same parents).  In that case, the limits will be combined and the security norms will be applicable accordingly.  If they avail loan under education loan under IBA scheme, all the brothers / sisters are also eligible for interest subsidy, subject to other conditions.

07.  Some banks refuse to accept applications, if the marks are less than 60%.  is it right?

This is wrong.  As long as the student got admitted under merit channel, irrespective of the marks, they are eligible for education loan under IBA scheme.  Please also see the High Court Judgement posted in this site.

08.  If we have grievance, how to take it forward?

If the students have any grievance for violation of guidelines, harassment, etc., they can meet the concerned Regional Manager of the bank and submit a complaint.  They can also submit a complaint to the Chairman of the concerned bank and also to RBI.  Details are given in this site.  

09.  If the students want to avail education loan for foreign studies, what should we do?

Banks do not grant eduction loan for medical courses in Russia, China and some other countries.  The students completing these courses outside India may have difficulties in practising in India.  They are not approved by Indian Medical Council.  Besides, many of the students get admissions in institutions that are not approved by banks.  Then they find it difficult to get bank loans.  
Even those who are completing higher education in foreign countries with bank loans find it difficult to get employment in India or anywhere.  ELTF is getting lot of mails about the students getting into 'debt trap'.  Banks are concerned with the employability and repayment capacity, after completion of foreign education.  Hence, the students are requested to be more cautious while going for foreign education.  Instead of looking for bank loans, they can explore scholarships to cover their expenses.  Interest subsidy is also not available for education in foreign countries.  

10.  How to repay the bank loans?

The repayment starts one year after completion of study or six months after getting employment, whichever is earlier.  If the student is eligible for interest subsidy, banks will get the reimbursement from the Government.  Banks will start applying interest after moratorium period.    

If the student is not eligible for interest subsidy, the accrued interest will be added to the Principal amount after the moratorium period.  

After the moratorium period, bank will fix EMI repayable within a maximum period of 10 years of 15 years, depending on the amount.  Students can opt for 'telescopic' repayment schedule.  That means, depending on the income, students can pay lower EMI in the initial period and higher EMI later.  Students should insist on a longer repayment period, so that the loan does not become Non Performing Asset.


11. How to approach ELTF?

If any guidance is needed on the issues, which are not discussed in this site, you can write to us at info@eltf.in with full details.  We do not entertain 'tweet' type of messages.  We do not entertain any phone calls.  

ELTF does not undertake to get loans.  ELTF gives only guidance.  The students and parents have to meet the Bank officials and discuss the loan proposal directly with them.  If students and parents notice any violation of RBI / IBA guidelines, they have to bring it to the knowledge of REgional Managers and Branch Managers first.  If they do not respond, they can report to ELTF through mail with full details, including the name of the bank, branch, the officials met, the problem, etc.  If needed, ELTF will directly take up with Chairman of the Bank and with RBI for their attention.  


12. Can banks stop disbursing future instalments of fees, when the students keep 'arrears' of papers?

Students write to us saying that the banks do not release the next instalment of fees, when they keep few arrears of papers.  When the banks give finance, banks expect that the students should study well without any worries about money and pass the examinations with good marks.  If the students, do not take the education seriously and keep arrears of papers, the students lose the employment opportunities, defeating the purpose of education loan.  Naturally banks have every reason to show their concern when the students fail in some papers.

Indian Banks Association in their circular No CE/210 dated 31st May 2012 sent to all banks has suggested as follows. 


quote:
   (g) Where institutions permit students to keep terms, in case of failure in one or two subjects, banks could disburse subsequent instalments.
unquote

If the Colleges permit the student to pursue the education in the next semester, not withstanding the arrears of one or two papers, IBA has suggested the banks to disburse the next instalment of fees.  If the students are not permitted to go to the next semester / term, then banks will not release the instalment.  

If the students keep arrears, they can meet the branch manager along with the parents and give a letter of undertaking to the bank that the student would clear the arrears within the next semester.  They can also request the bank to release the next instalment of fees.  The student should keep up his assurance and clear all the arrears within the next semester.  Generally banks will oblige, if the student keep arrears of one or two papers.  

When the students talk about their right of education loan and obligations of banks, they should remember their duties and obligations to the banks.

Important

The above guidelines are applicable only for loans under IBA scheme.  If the banks consider the loan application under their own scheme (Non IBA Scheme) the above rules may not apply.  The students have to check with respective banks.  

ELTF does not get loans or undertake get loans.  ELTF provides only guidance to the students and parents.  ELTF does not intervene with the procedures of individual banks.  

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